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What's inside?
Given the controversy following the Biden-Trump Presidential Debate, now serves as good a time as any to discuss corporate risks involving corporate donations to any political party, campaign, or political action committee (“PAC”).
This is especially true as radicalism, nationalism, protectionism, and populism are higher risks globally given the elections and changes in government this year.
The Federal Election Commission has strict rules in how a corporate entity can donate to US political campaigns. Corporate donations are often through a PAC or Super PAC which may have specific political aims or affiliations.
In Citizens United v. Federal Election Commission, the Supreme Court recognized that U.S. citizen-shareholders of corporations could exercise their First Amendment rights through the corporate entity’s political donations.
It should be noted, however, that this corporate political empowerment was intended to be for the shareholders, not necessarily the Board members as Justice Kennedy recognized this as a “procedure for corporate democracy.”
According to the Campaign Legal Center, total election spending in 2020 was $14.4 billion (2018: $5.7 billion) in which more than $1 billion was from groups with undisclosed and unidentified donors contributing “dark money” to super PACs.
Companies should take note though that certain states and local governments have rules further preventing companies with as little as 1% of foreign shareholders from donating to political campaigns as this may be construed as “foreign influenced”.
Corporations seeking to make donations should discuss this with their compliance officers and counsel in order to adequately scope applicable legal and reputational risks.
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This information is not intended to constitute any form of opinion or specific guidance and recipients should not infer any opinion or specific guidance from its content, including but not limited to legal advice. Recipients should not rely exclusively on the information contained in the bulletin and should make decisions based on a full consideration of all available information. We make no warranties, express or implied, as to the accuracy, reliability or correctness of the information provided. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide and exclude liability for the statistical content to fullest extent permitted by law.
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